U.S. Official Cites Possible Chinese TRIPs Violations

[Editor’s Note: This story was modified at 6.30pm on Friday 18/2/2005]

Washington, D.C.—A key U.S. official based in Beijing on Thursday cited several ways that China’s interpretation of its criminal code may violate the World Trade Organisation Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPs).

But Mark Cohen, the intellectual property attaché at the U.S. Embassy in Beijing, speaking to a group of government officials, industry representatives and lawyers at the U.S. Patent and Trademark Office, declined to speculate on the likelihood the U.S. government will bring a WTO case against China under pressure from domestic industry.

One way Cohen said China’s interpretation differs is that it says a trademark is violated by an “identical” product, while in TRIPs a violation occurs if it is identical or confusingly similar, as stated in Article 16.

He also noted the possible inconsistency of China’s system with TRIPs Article 61, which commits members to providing criminal procedures and penalties for trademark counterfeiting or copyright piracy “on a commercial scale.” China’s law uses the standard of “relatively large sales volume,” he said.

Steven Pinkos, deputy director of the USPTO, told the seminar on China’s criminal justice system that the office’s “primary focus on the international front is on China.”

USPTO Director Jon Dudas was in China in January with then-Commerce Secretary Donald Evans, and new Commerce Secretary Carlos Gutierrez is “interested” in the issue, he said. China is seen by many businesses as the market of greatest opportunity in the world, but also the one with the highest level of intellectual property theft.

The seminar was part of a series of initiatives against overseas piracy and counterfeiting for which Congress gave USPTO USD20 million in its fiscal 2005 budget (ending Sept. 30). Other efforts will include additional seminars and training sessions, and work with the government, judiciary and private sector in China.

Cohen and Prof. James Feinerman, associate dean of Georgetown Law School and a China legal scholar, walked participants through China’s judicial system, citing progress and problems since the nation acceded to the WTO in November 2001.

Another problem in the criminal code that Cohen pointed to is that an export does not constitute a sale, which calls into question how the government treats the “huge” volume of international counterfeit goods from China, he said. Overall, the country’s criminal code is antiquated, Cohen argued. At the meeting, representatives of U.S. intellectual property owners such as Eric Smith, president of the International Intellectual Property Alliance, and Joe Papovich of the Recording Industry of America, raised legal problems they are facing in China.

The Chinese system is broken into civil, administrative and criminal courts. Administrative courts are “primary feeders” into the national legal system, Cohen said. Civil cases are rapidly rising, with 12,213 in 2004 representing a 32 percent increase overall and a 71 percent rise in copyright cases. China’s intellectual property office is the busiest in the world, he added. With more than 580,000 trademark applications pending, the wait is estimated at up to 12 years. The nation also has the most design patent applications in the world.

Cohen, who is much-sought-after by U.S. industry lobbyists, described China’s system for intellectual property rights as “fractured,” with copyright cases handled separately. Furthermore, there are numerous Chinese agencies with some jurisdiction over intellectual property issues, but some do very little with that authority, he said. “It’s a real hodge-podge,” he said.

In April 2004 negotiations with the United States, China agreed to toughen its intellectual property protection. In December, it met a year-end deadline to issue a new “judicial interpretation” on “handling criminal cases of infringing intellectual property,” aimed at filling holes in the criminal justice system. The government also has several other laws and measures pending in areas such as antitrust, anti-counterfeiting, and patents, he said. In addition, Internet regulations are expected by the end of 2005.

Judicial interpretations are being drafted in other areas, such as patent litigation, plant varieties, and unfair competition, he said. The government also is actively discussing policies on traditional knowledge, traditional Chinese medicine, folklore, and genetic resources, which he included on a list of “counter-policies” taken by China.

A major change in the new judicial interpretation is that the monetary thresholds for seized and confiscated counterfeit and pirated goods have been significantly reduced, USPTO said.

At the event, Cohen gave such a sobering account of China’s complex system for intellectual property rights protection that a participant from a leading U.S. trade association afterward called it “a pretty grim picture.” Based on what he had heard, he added, “The Chinese government looks like it took as long as it could with as opaque a process it could to come out with as little as it could.” He said the U.S. government “needs more people, especially on the ground in China.”

The Bush administration sees counterfeiting in China as “a huge problem,” Pinkos said. The U.S. strategy includes trying to impart to the Chinese government that a system like that in the United States would benefit them as well, he said, adding that Japan has recognised this. The United States also has pushed for more prosecutors in China. But what may really change the system is when Chinese products begin being pirated, he said.

Feinerman cited a recent case in which former employees of a Chinese company called Huawei founded their own firm making similar optical networks to those of their former firm. He said China is beginning to move forward from just trying to “mollify” the U.S. Trade Representative’s office when it conducts its annual review of the country’s protection of intellectual property rights.

USPTO has some 7,000 employees and perhaps 1,000 contractors in its impressive new complex in Alexandria, Virginia, across the river from Washington, D.C. More than 4,000 of its employees are patent examiners. USPTO experts travel overseas “to ensure countries have the right laws on the books and enforce them,” Pinkos said.

USPTO’s Elaine Wu will participate in seminars on 28 February and 1 March in China organized by the RDPAC, an organization of the research and development arms of international pharmaceutical companies with active operations in China, to provide training to officials from the State IP Office of China (the Chinese patent office) and the State Food and Drug Administration (the Chinese FDA).

According to USPTO, the aim is to promote transparency in the drug approval application process and to promote a more consistent and stronger protection regime for drug marketing approval in China. The seminars are part of a technical assistance work plan that the USPTO and China have agreed to work on together and was announced during the January trips to China by Evans and Dudas, the office said.